STAY IN CHARGE
Most people begin planning for their future by thinking about a Will.
Plan first for life. How do you want to spend your retirement? How can you stay in charge?
Contact an Austin estate planning and probate attorney for help.
HIPAA Medical Information Release tells your doctor and other health providers who they can talk to about your health.
A Texas Medical Power of Attorney tells your doctor who to listen to if a treatment decision must be made and you are unable to make it. About half of people over 65 arrive at the hospital unable to direct their care. You can appoint more than one person (in order) but only one person can act at a time. People become confused under distress. Attach a letter. Reassure them that they are choosing as you would.
A Texas Durable Power of Attorney grants and limits the power of someone you appoint to handle your finances. You can appoint co-agents. Your Durable Power of Attorney can become effective either when you sign it or if and when your doctor finds that you have become mentally incompetent to take the actions listed. (You may still be mentally competent to do other things.) You might want to include the power to gift, to hire care givers and to do Medicaid planning. You will need separate documents to appoint an agent to deal with the IRS or Social Security. Whatever your Durable Power of Attorney says, be careful who you pick for your agent: it is estimated that 1/3rd of elder fraud is committed using a Durable Power of Attorney.
A Texas Advance Directive (sometimes called a “Living Will”) tells your doctor what you do and do not want done if, even with available medical treatment, you are not expected to live more than six months or if you are in an irreversible comatose state. For clarity, add a Statement of Intent. Discuss your wishes with your family.
You might also want to consider a
A Texas Supportive Decision Making Agreement
A Family Caregiver Agreement
A Texas Declaration of Guardian in Case of Need
A Texas Mental Health Treatment Directive
A Texas Out-of-Hospital Do Not Resuscitate Order.
By deciding now, you can stay in charge. These and other measures can be Alternatives to Guardianship.
Whether you have a Will or not
- your assets must be inventoried because
- your debts must be paid and
- your remaining property must be distributed.
What if you never write a Will?
What if you get one from the internet or from a financial planner or a life insurance agent which works in New York or Florida but not in Texas?
Would you even know? Would you only think that you have a valid Texas will? What would happen if you did not?
Texas is a community property state. If you are married, you probably have at least one kind of community property. In Texas, there are five kinds.
You also have separate property. Some of it is personal property. Some of it might be real property.
If you do not have a Will and all your children are also the children of your current spouse, your half of the community property goes to your spouse. If not, your half of the community property could be divided among your children from a previous marriage (though your spouse has the right to remain in the family home for life.)
Two-thirds of real estate which you own separately from your spouse is divided equally among your children. Your spouse gets the other one-third for life. Then it is divided equally among your children.
Mineral rights are even more complicated.
Blended and non-traditional families can face unexpected situations. Two-thirds of your personal property goes to your children — born or adopted by you — but not to step-children or children for whom you are the legal guardian. One-third goes to your current spouse. If you die before your spouse, your children will not inherit from her unless they are also her children. A Will can solve this using a Qualified Terminable Interest in Property.
If your child dies before his or her spouse, the spouse, your in-law, and that in-law’s children — or that in-law’s next spouse — will inherit. Your own grandchildren could be left out in the cold. A Will can address this possibility, too.
A Will makes settling your estate faster, cheaper, easier– and much less confusing. The person who inventories your property, pays your debts and distributes what is left to the people you name in your Will is your “executor.” In Texas your executor need be in court to be officially appointed no longer than it takes to drink a cup of coffee. Your family can be provided for in the way you want. They can be relieved of the financial and emotional burden of an heirship proceeding and the potential expense of posting a bond or having the court appoint and oversee someone who settles your estate.
You can name your children’s guardians in your Will. You can name them in a separate document which you can change without changing your Will. (People who are great with little ones may not be skilled at parenting teens.) You can sign a special Power of Attorney naming a caregiver to arrange for your children’s medical care and education when you are unable to act.
Wills only distribute “probate assets,” those assets whose new ownership must be “probated,” or proven.
Wills do not affect 401(k)s, IRAs, other brokerage accounts with a named beneficiary or bank accounts or real property held “jointly with right of survivorship.” They do not affect “pay on death” or “transfer on death” accounts or real property subject to a “Lady Bird” or a Texas transfer on death deed. Have the related documents reviewed by an attorney to make sure that all your property will pass the way you want at the lowest cost and in the shortest time. On average, it takes about two years to settle an estate. In Texas, with a properly drafted Will, it can take as little as six months.
Wills can authorize someone to access your online information and digital accounts. Where will they find the usernames and passwords? Consider storing them on a site such as www.legacylocker.com or http://keepass.info.
Is a Will enough? Maybe.
You might want some flexibility in providing for your health care or in protecting your retirement funds. You might want to protect your spouse or minor children. You might have children from a previous marriage or family members with special needs. You might want to give a beneficiary an incentive to finish college or a treatment program or insure that a certain in-law never receives your property, even if your child dies first.
In many cases, the answer is a Trust. A Trust is simply an agreement by which one person is trusted to handle property for another, sometimes with positive tax results and sometimes preserving eligibility for government benefits such as Social Security and Medicaid. When you contribute to a 529 college savings plan or to a 401(k) retirement plan, you are in essence creating a Trust. Within pre-set limits, you are trusting someone to handle your money for the person who will eventually receive it.
A Trust can be effective now or when a certain event occurs or when you die. It can be a separate document or it can be incorporated in your Will.
With simplified Texas probate and with the federal estate tax exemption for a couple now approaching $11 million, there may be less reason to use a Revocable Living Trust to limit probate when the first spouse dies. Estate administration through probate is not significantly more time-consuming than estate administration through a living trust. A Revocable Living Trust can allow one spouse to arrange assets for a better after-tax return or for other purposes if the first spouse is no longer medically competent to act. It can keep more inheritance arrangements private. It can specify where and how you want to be cared for and require periodic assessments of the arrangements by a geriatric social worker. But it cannot protect assets from creditors or eliminate the need for probate. Unlike irrevocable trusts which do not benefit you, a revocable living trust cannot exclude assets in determining financial eligibility for Medicaid. It can actually interfere with Medicaid planning. Over the years, it can have a poor after-tax result compared to dividing taxable property between an estate and a testamentary trust established by a Will. As with everything else, your circumstances will determine how useful it is for you.
Perhaps the most common reason for a Trust created by your Will (called a “testamentary trust”) is to provide both for your spouse and for the children of a previous marriage or the grandchildren of that marriage. This is typically incorporated in your Will as a Qualified Terminal Interest in Property or “QTIP” Trust.
Other important uses of a Trust are to secure your Medicaid eligibility through a Qualified Income Trust, also called a Miller Trust, and to provide for a surviving spouse’s future care.
A testamentary Special Needs Trust can let her be much more comfortable and enjoy life much more than she would relying on Medicaid’s measly $60 monthly personal needs allowance. You won’t be there to bring her a new pair of slippers or pay her cell phone bill.
Deciding how to benefit children and grandchildren and prevent them from having too much money, exposing them to youth’s temptations, can also be handled with a testamentary trust.
You can allow for payments for a college education or a down payment on a house. You can determine what percentage can be paid out by different ages and under what conditions. You can give the trustee absolute discretion over whether to pay anything at all.
If you have a family member with special needs or if you yourself have special needs or have been seriously injured, you may prefer to create a Special Needs Trust.
If you are not able or eager to handle the burden of investing, managing and accounting for the money, a professional trustee can do so. Your financial advisor can become the trust advisor. A family member or friend can be a trust protector, advising the trustee on what to buy for you or removing him if necessary. Or a group of family members and friends can be a trust protector committee.
One form of Trust which should be separate from your Will is a pet trust. Fido may think that he is a member of the family and so may you. But the probate court’s family allowance will not include money for kibble and care while your estate is being settled.
There are other ways to provide for your spouse and your children — and for yourself. Cost, control and complexity may guide your choices.
ESTATES AND PROBATE
Everyone owns something so everyone has an estate which must be settled when they die. Even if you manage to get everything in a Revocable Living Trust, you will need a Pour Over Will. Even if you only have the clothes on your back, someone must file an Affidavit of Small Estate. But Texas Probate can require very little court involvement and need not be expensive.
It is estimated that 15-20% of estates plans fail due to changes in assets, changes in health or relationships or changes in the law. Review your estate plan every year, just like you get a physical check-up. Ask yourself
- Did I acquire any real estate this year?
- Did I acquire any accounts which have a beneficiary designation?
- Has my family situation changed?
- Does my estate plan still do what I want?
- In what name is my property owned? Do I need to make changes about survivorship and rights of survivorship?
Whatever you choose, review your documents with a lawyer every couple of years.
You want your documents to work when you need them, not just when you sign them.
Terry Garrett, an experienced Austin estate planning and probate attorney, can help you stay in charge, save money and leave the legacy you want. The Garrett Law Firm works with individuals and families throughout Central Texas to create practical, low-cost solutions. 512-800-2420